Magnus Bocker, the Singapore
Exchange Ltd. (SGX) chief executive officer whose attempt to take over
Australia’s bourse spurred a $20 billion round of global market
consolidation, may have lost his partner.

Australian Treasurer Wayne Swan said the Foreign Investment
Review Board advised him against the A$7.74 billion ($8 billion)
offer for ASX Ltd. (ASX), which would have created the world’s fifth-
largest exchange operator by the value of its shares. Singapore
Exchange expects a final ruling within days, the CEO said
yesterday on a conference call.

Rejection is rare for Bocker, who stitched together eight
European stock markets and sold them in a bidding war to Nasdaq
OMX Group Inc. (NDAQ) four years ago. While the 49-year-old marathoner
said he has other options should the deal fall apart, the
decision may leave the Singapore bourse vulnerable as exchanges
around the world run out of ways to boost earnings.

“He hasn’t accomplished what he set out to accomplish,”
said Alison Crosthwait, Toronto-based director of global trading
strategy for Instinet Inc., a New York-based subsidiary of
Nomura Holdings Inc. in Tokyo. “Bocker knew there would be
challenges. Acquiring a national exchange is an ambitious thing
to do, but this is a bit of a setback.”

Singapore Exchange’s shares rose 4 percent to S$8.33
yesterday after losing 16 percent since Oct. 22, the last
trading session before the deal was announced. They have gained
8.5 percent since Bocker was appointed CEO on July 20, 2009,
compared with a 28 percent advance in the FTSE Straits Times
Index, data compiled by Bloomberg show.

Global Growth

“Asia will remain the world’s growth engine in the coming
decades,” Singapore Exchange said in a statement yesterday.
“We will continue to pursue organic as well as other strategic
growth opportunities, including further dialogue with ASX on
other forms of cooperation.”

Bocker sought to create a regional trading and listings
center that would compete against Hong Kong Exchanges & Clearing
Ltd., which at $25 billion has the largest market value among
publicly traded exchange operators.

Board Concession

Singapore Exchange offered on Feb. 15 to give more board
seats to Australians in a concession aimed at overcoming
opposition from lawmakers in Canberra to the deal, which won
approval from Australia’s competition regulator on Dec. 15.

“Magnus is an incorrigible optimist,” said Lynton Jones,
who first worked with Bocker in 1992 at OMX AB’s London exchange
and is now chairman of Bourse Consult, which advises on market
structure. “The problem was always persuading some fairly
provincial politicians to take a global view. That was always
going to be a hard struggle.”

Stock exchanges around the world are merging to stay
competitive. About $20 billion in proposed acquisitions have
been announced in the past five months as companies in North
America, Europe and Asia try to cut costs and seek new revenue
from trading in stocks, options and futures.

Net income is growing at Singapore Exchange at a compounded
rate of 1.6 percent a year, compared with 5.7 percent at ASX,
based on company reports and analyst estimates between 2007 and
2012 compiled by Bloomberg. Nasdaq OMX’s earnings are poised to
fall 1 percent a year over that period, while NYSE Euronext (NYX)’s
may rise 3.9 percent and CME Group Inc.’s climb 14 percent, the
data show. Hong Kong Exchanges may post 5.4 percent growth.

Growth Engines

“The Singapore exchange needs to grow, do something to
improve their growth prospects,” said Instinet’s Crosthwait.
“If they’re not allowed to do this with the Australian
exchange, they will do something else. If they’re left on their
own, they’ll have to figure out ways to expand their footprint
solo. That’s the decision tree Bocker’s got.”

Winning in Asia proved harder for Bocker than in Europe,
where he combined companies from Finland to Iceland to create
Scandinavia’s biggest exchange in Stockholm-based OMX AB. New
York-based Nasdaq, now pursuing an unsolicited offer for NYSE
Euronext, acquired OMX in 2008.

Bocker succeeded Hsieh Fu Hua at the Singapore bourse in
2009. He is investing S$250 million ($198 million) in an order-
processing system that may be the world’s fastest when it starts
this year. His biggest initiative, the ASX takeover, foundered
amid nationalism.

Hostile Parliament

The recommendation from the Foreign Investment Review
Board, part of Australia’s Treasury Department that advises its
top executive, allows the Labor Party government of Prime
Minister Julia Gillard to avoid legislation enabling the deal
through a potentially hostile parliament, said Barnaby Joyce, an
opponent of the merger and a member of the opposition coalition
partner the Nationals.

“This is convenient for the government because it doesn’t
have to face the political reality that there is no way the
parliament would have approved this nonsense deal,” Joyce said
in an interview from Tamworth. “It would have seen the closure
of Sydney and Australia as a commercial center if this ludicrous
proposal had been approved. Jobs would have disappeared.”

The price-earnings ratio for Singapore Exchange’s stock
dropped as much as 24 percent following the Australian bid amid
investor concern about the proposed premium. The valuation sank
to 25.6 times reported profit from the prior year on March 15
from 33.8 on Oct. 22. Their valuation has rebounded to 29.3,
according to data compiled by Bloomberg.

NYSE, TMX Valuations

That compares with NYSE Euronext, which trades for 18.6
times reported earnings, TIMX Group at 14.6 and Hong Kong
Exchanges at 38.7.

Singapore’s takeover was the first foreign merger to be
opposed on national interest grounds in Australia since former
treasurer Peter Costello blocked a $3.2 billion bid by Royal
Dutch Shell Plc in 2001 to take control of Woodside Petroleum
Ltd. A final ruling on the bourse takeover is expected within
days, Bocker said in yesterday’s conference call.

“Maybe both CEOs made a misjudgment,” said Niki Beattie,
CEO of Market Structure Partners Ltd., a consulting firm in
London that advises brokers and exchanges. She’s a former
managing director at Bank of America Corp. and Merrill Lynch &
Co. who focused on exchange and securities regulation. “People
have to work very, very hard in the background to persuade
others the deal is a good thing before it’s announced. It
doesn’t seem like they did enough.”